GPT - GPT Group

[skc]

Looks like GPT may not miss out on scooping up CPA after all. GPT today announced a superior scrip and cash take-over offer for CPA of $1.272 per share trumping the bid of $1.205 offered by Dexus. Will Dexus up the anti?

Definitely a surprise considering that DXS already had 15% of CPA locked up. GPT took their sweet time and they could have put in the bid before DXS raise its offer. The price of 7% above NTA is also quite a premium.

All in all it feels like a move that is more concerned about getting bigger, rather than a very compelling deal in its own right.

GPT should have put in a left-field offer for IOF or something when it was trading at 5% discount to NTA when the DXS/CPA deal was first announced.

 

[coolcup]

Interesting that the market has sent GPT shares down 1.5% on the news. Again, goes to confidence in management's strategy. What do these assets really bring to GPT aside from the small upfront accretion...

 

[nulla nulla]

Interesting that the market has sent GPT shares down 1.5% on the news. Again, goes to confidence in management's strategy. What do these assets really bring to GPT aside from the small upfront accretion...

The initial market reaction was to send GPT down $0.06 but then it recovered $0.02. The volume of turnover is fairly low. I suspect the market is taking a more "wait and see" perspective.

From todays price action on CPA, with good volume, it also looks like the market is not expecting a bidding war. The price action around $1.26 being pretty much in line with the offer of GPT and the prospective dividend from CPA. From the price action on Dexus it looks like the market didn't thing much of their market release "We are doing due dilligence and have no comment at this stage"

When GPT made an offer for Australand, the market initially sold GPT down a little then pushed it up significantly. If successful, I think it is likely that GPT would keep the core assets of CPA and sell off the non core assets. Obviously there would be synergies for bringing the management in house with the existing management team. Probably ask Canadian Pensions if they want the non core assets (?)

 

[coolcup]

The initial market reaction was to send GPT down $0.06 but then it recovered $0.02. The volume of turnover is fairly low. I suspect the market is taking a more "wait and see" perspective.

From todays price action on CPA, with good volume, it also looks like the market is not expecting a bidding war. The price action around $1.26 being pretty much in line with the offer of GPT and the prospective dividend from CPA. From the price action on Dexus it looks like the market didn't thing much of their market release "We are doing due dilligence and have no comment at this stage"

When GPT made an offer for Australand, the market initially sold GPT down a little then pushed it up significantly. If successful, I think it is likely that GPT would keep the core assets of CPA and sell off the non core assets. Obviously there would be synergies for bringing the management in house with the existing management team. Probably ask Canadian Pensions if they want the non core assets (?)

Unlikely CPPIB will want the non-core stuff. They are only interested in the trophy assets. 5 core assets are being sold to GPT's wholesale office fund GWOF with the remainder being held on balance sheet. The suburban office assets will likely be sold into GPT's new metropolitan office fund which they are currently seeding.

DXS wins either way. They either win the CPA assets or they get a more handsome premium for the 14.9% stake if GPT win the bid. GPT's bid has no due diligence conditions, which as an investor would make me nervous that management are pushing too hard to get a deal done. I think it would have been much more sensible for them to look at IOF while DXS was preoccupied on CPA.

 

[nulla nulla]

Unlikely CPPIB will want the non-core stuff. They are only interested in the trophy assets. 5 core assets are being sold to GPT's wholesale office fund GWOF with the remainder being held on balance sheet. The suburban office assets will likely be sold into GPT's new metropolitan office fund which they are currently seeding.

DXS wins either way. They either win the CPA assets or they get a more handsome premium for the 14.9% stake if GPT win the bid. GPT's bid has no due diligence conditions, which as an investor would make me nervous that management are pushing too hard to get a deal done. I think it would have been much more sensible for them to look at IOF while DXS was preoccupied on CPA.

The comment about the "non core asset offload to the Canadians" was tongue in cheek. I suspect that GPT and the DXS consortium both have their eyes on the same key properties. No doubt when they have completed due dilligence the DXS consortium will be better placed to assess whether or not there is enough synergy in the merger/take-over of CPA for them to sweeten the deal.

As to IOF, I suspect it is too tightly held by the majority shareholders to be an easy target. Dexus would certainly make a profit by selling their 13.5% stake pg CPA acquired at $1.135 into the GPT bid. With the CPA div they would make arround $0.135 per share, arround 12% for a couple of months investment.

 

[coolcup]

GPT down another 1.5% as I type. DXS up 0.5%. The market is clearly backing the more believable bid.

GPT's strategy is to acquire CPA via a takeover and sell down 5 assets to GWOF. To execute this strategy they need to get to 90% for compulsory acquisition of CPA to force such sales through. DXS holds 15% so this isn't possible. GPT were asked on the conference call what they would do if they didn't get to full control, the CEO's reply was "rational heads will prevail". He used the same words when describing his tilt at Lend Lease's industrial fund.

They are desperate to prevent DXS getting control of these assets but have no real means to dislodge them. If DXS match GPT's approach and pay CBA (the current manager) nothing and instead use those funds to pay CPA holders, they can match GPT's bid plus more given the way the relative share prices have moved since GPT's announcement. Well played GPT...not.

 

[nulla nulla]

GPT down another 1.5% as I type. DXS up 0.5%. The market is clearly backing the more believable bid.

At close of market the entire A-REIT sector is down 1.16%. Dexus is down 0.47% and GPT is down 1.66% in the closing auction Dexus dropped half a cent while GPT lifted by one cent. You have to remember that tomorrow is options settlement day for this month and it is not unusual for the market to be pushed down the day before. I'm not choosing sides, I'm happy to trade both dxs and gpt, but I wouldn't put too much into todays price actions as an indicator of the markets support for either bid. Subject to Dexus revising their bid, at this point in time GPT has the superior bid for the CPA shares.

GPT's strategy is to acquire CPA via a takeover and sell down 5 assets to GWOF. To execute this strategy they need to get to 90% for compulsory acquisition of CPA to force such sales through. DXS holds 15% so this isn't possible. GPT were asked on the conference call what they would do if they didn't get to full control, the CEO's reply was "rational heads will prevail". He used the same words when describing his tilt at Lend Lease's industrial fund.

I have to correct my early post, the papers indicated this morning, if successful in their bid GPT will sell six (6) prime assets into GWOF. If GPT gains control of 85% of CPA then Dexus will have two choices, either sell into the bid and make approximately $43 million dollars profit or continue to hold their shares and be completely at the mercy of GPT. I suspect the prospect of walking away with $43 million would influence any "rational heads to prevail".

They are desperate to prevent DXS getting control of these assets but have no real means to dislodge them. If DXS match GPT's approach and pay CBA (the current manager) nothing and instead use those funds to pay CPA holders, they can match GPT's bid plus more given the way the relative share prices have moved since GPT's announcement. Well played GPT...not.

I suspect if Dexus were to up their anti to outbid GPT, their existing offer to buy out management control from CBA would still be binding. It would become a very expensive exercise. The volume of turnover on CPA today would suggest that either or both parties are increasing their holdings to the extent allowed. I'm happy to sit back and wait to see the outcome. I suspect CPA holders are going to prefer an offer that completes quickly and is not subject to the delays per Dexus's existing offer. As I said, I am impartial as to who wins.

 

[coolcup]

Will be interesting to see how this plays out. My understanding is most "long only" traditional institutional holders have now exited CPA and the register is full of hedge funds. Most of these instos are extremely annoyed at GPT's approach because it is effectively taking money out of their pockets (they are heavily invested in GPT) and putting it into the pockets of the hedge funds. It hasn't been received well by the domestic property security funds.

 

[nulla nulla]

Will be interesting to see how this plays out. My understanding is most "long only" traditional institutional holders have now exited CPA and the register is full of hedge funds. Most of these instos are extremely annoyed at GPT's approach because it is effectively taking money out of their pockets (they are heavily invested in GPT) and putting it into the pockets of the hedge funds. It hasn't been received well by the domestic property security funds.

Thats interesting. It is the sort of thing that isn't evident in media releases or comments from Analysts to Journo's but would exist in the background. No doubt their "annoyance" would flow through to their trading decisions as well. Even instos are human. You obviously have access to more info than from just reading the releases and observing the market. I posted a link in the CPA thread to an article by Carolyn Cummins in todays fairfax BusinessDay:

http://www.smh.com.au/business/dexus-set-to-up-the-ante-in-cpa-battle-20131120-2xvs0.html

Your earlier comment re share price movement indicating market support or lack of it for the DXS or GPT offer is also supported, "Fund managers said the share price movement over the next couple of days would give an indication as to which offer investors were prefering".

The timing of the GPT bid in proximity to todays options settlement clouds the crystal ball a little (as well as the CapitaLand sell down of their Australand holding). The article above also indicates that Dexus has to respond to the bid from GPT within three days, which is today? I guess we are just going to have to wait and see how it pans out.

 

[nulla nulla]

Well the pan out was a withdrawal of the GPT bid after they entered into an agreement with Dexus to carve up the CPA assets when Dexus completes the purchase of CPA. Even though GPT was effectively unshackled from the CPA bid the GPT share price did not rebound to and hold previous levels, prompting GPT to resume their buy back when the share price retreated to $3.60. It would seem that the fund managers (as outlined above) may still be annoyed with the GPT bid. Obviously the GPT share price would also be impacted like the rest of the A-REIT Sector by the international goings on, Crimea, Chinese Shadow Banking, the easing of Quantative Easing and Glen Stevens jawboning the Aussie economy.



Personally I think GPT is way overdue for a bounce but that is only my two cents worth. As always do your own research and good luck.

 

[nulla nulla]

...
Personally I think GPT is way overdue for a bounce but that is only my two cents worth. As always do your own research and good luck.

$3.69 to $3.80. I think I could reasonably call this a bounce. The whole A-REIT sector bounced today. There may still be some legs left in this run. Still holding two parcels will see where it goes while watching for cautious re-entry levels.



As always, do your own research and good luck.

 

[nulla nulla]

Dropped the remaining parcels today. The first at $3.85 on open and the second late in the morning when GPT hit $3.88.



I was surprised at the volume of shares that turned over at $3.88 and indeed for the day. I can't work out whether shorters felt the need to close out their positions or whether the fund managers have forgiven GPT for the CPA exercise. However, while the share price retraced towards the end of the day, it still closed above the previous days closing price. We are sitting out for now to see whether GPT can go higher from here or retraces. As always, do your own research and good luck.

 

[nulla nulla]

There seems to be a resistance level at $3.98. GPT is due to go ex-div this week. It will be interesting to see if the share price falls below the recent support level around $3.85 or rebounds quickly. Seems A-REIT's have been enjoying a little time in the spotlight with sustained climbs since late March early April 2014. GPT seems to have shrugged off the unsuccessful tilt at ALZ as well as coming out well from the carve up of CPA. Perhaps it is time for GPT to push back above $4.00 and stay there???? As always, do your own research and good luck.

 

[nulla nulla]

Not bad, went ex-div at $3.94, dropped to $3.85 and then went on the rebound to $3.95.



As always do your own research and good luck.

P.S. watch out for any portfolio re-weighting on Monday.

 

[nulla nulla]

GPT seems to be range bound between $3.85 and $3.97 for the last few weeks.



Trading in an even tighter range for the last week or so (between $3.87 and $3.92) my frustration sitting in the queue at $3.85 to have a bid filled isn't helped when Mr's nulla jumps in at $3.87 and out at $3.92 for a couple of quick modest sized trades. Bloody front runners

 

[nulla nulla]

The last time I bought GPT above $4.00 the tsunami of foreign investment money evaporated and I took the losses at $3.75 before 30 June 2013 for a tax offset against our accrued capital gains for 2012/2013.

The next time I tried to trade GPT above $3.80 the market sent the share price down to $3.36. This time I didn't have the short term opportunity to offset capital losses against accrued capital gains for tax minimization and I elected to "ride it out" and take the dividends, confident that GPT would recover above the $3.80 entry point.....eventually.

Two dividends and nine months later my trades came back into the black and we locked in our profit closing out the positions for profits (combined capital gain and divs) greater than 6%. Better than bank rates but poor in comparison with the returns on the rest of our investment funds which hadn't been locked in during those nine months.

Even though we have traded a few parcels of GPT between April and July, as it tracked sideways ranging between $3.84 and $3.98, you can probably understand my reluctance to jump in above $4.00.

Code	Closing Price	Capital	Earnings $	ROE	Dist $	Yield %	P/E	NTA $	Premium to NTA
GPT	4.000 ​	6,741,843,820​	0.3150​	7.88%​	0.2040​	5.10%​	12.70​	3.79​	5.54%​

Reporting season is coming up. GPT has come out of the CPA take over battle in a win win situation, their funds from operations should be higher, their debt ratio will no doubt be higher than the previous level of 22% but it should be reasonably under their maximum comfort level of 35%, their yield levels are good and their price earnings ratio is one of the lowest of shares in the A-REIT sector. However, at this point I still think there are better low risk trade opportunities else where and I will wait until GPT demonstrates it can hold this level going forward before I risk my dollars. As always do your own research and good luck.

 

[nulla nulla]

Seven months on and the GPT share price has managed to stay above $4.00. However having hit a high of $4.89 on February 5th, 2015 the share price has now tracked sideways and down to lows of $4.51 on 18 March 2015 with a latest close of $4.60 on Friday 27 March 2015.

Code	Closing Price	Capital	Earnings $	ROE	Dist $	Yield %	P/E	NTA $	Premium to NTA
GPT	4.600 ​	8,170,902,784​	0.3827​	8.32%​	0.2120​	4.61%​	12.02​	3.94​	16.75%​

Still too tight and unpredictable for me to trade. The weekend article in the Sydney Morning Herald that GPT may be lining up Investa for a take over doesn't encourage me to loosen the purse strings either. As always, do tour own research and good luck.

 

[skc]

Still too tight and unpredictable for me to trade. The weekend article in the Sydney Morning Herald that GPT may be lining up Investa for a take over doesn't encourage me to loosen the purse strings either. As always, do tour own research and good luck.

Investa is a BIG prize (and a BIG bite for most)... but imo whoever manage to win the race will be well received (provided that they didn't overpay).

 

[nulla nulla]

There hasn't been a lot of recent activity in this thread so I though it may be worthwhile throwing up a long term chart as well as a table comparing the share information over the past three or so years.

Disclaimer: The table information is taken from the A-REIT Tables posted previously. Accordingly if there were any errors in those tables then they have been repeated in this table.

 

[Trav.]

I purchase GPT this week @ 4.15 as part of my system and currently down as it closed yesterday @ 4.11 which is no big deal.

Announcement out today - September Quarter Operational Update so we will see how the market likes this and I suspect that the ASX is not going to have a good day as well

Extract below......